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Donkin on Work - Pay & Benefits

February 2004 - Pay and recognition

People were much more concerned to get broader responsibilities and new challenges from a job promotion than they were to get a pay rise, the results of a survey suggested this week.

The report by reed.co.uk, the internet job site, was drawn from 3,700 responses among UK employees to a web-based survey. Reed had asked people who had received a job promotion in the past five years to state what was the one change in their working lives they had most wanted from the promotion.

Three out of four people decided that "being given bigger responsibilities" was their priority. About 17 per cent of respondents placed "getting a pay rise" first. I have seen this kind of report before and I do not take issue with its headline findings. What I would challenge is any assumption from the results that a pay rise is not considered important.

The idealist in me would love to say that what we earn matters not nearly so much as other things in the workplace such as opportunities for development, promotion, recognition and satisfaction for a job well done.

Another sense - the common one, perhaps - rejects this proposition.

I could dig out plenty of old surveys to support Reed's findings. It is the accepted wisdom among human resources workers that people tend to place other things above pay when listing the aspects of a job that they prize most. The surveys speak for themselves. But we would be mistaken to dismiss the importance of pay.

One reason that it is not listed as a priority, I suggest, is that a pay rise is expected in a promotion. It is almost taken for granted. More than that, few people would want to show, even to themselves, a belief that their career aspirations are motivated by the desire for financial gain.

That we live in a state of self-denial over many aspects of our lives is a weakness of public opinion polls. Few of us, for example, would choose to describe ourselves as mean or distrusting or lacking in vision. Fewer still, when offered a career advancement, would be brazen enough to deliver that famous line in the film Jerry McGuire: "Show me the money." But most of us would be disappointed if a promotion did not include a pay rise.

The motivational strength of pay has been disputed for the best part of 70 years, ever since workforce experiments at Western Electric's Hawthorne factory in Chicago, ending in 1932, emphasised the role of employee recognition in productivity increases.

In fact it is arguable that it was not the outcomes of the experiments themselves that revealed the strength of recognition, but the interpretation placed on the results by Elton Mayo, the Harvard psychology professor who was invited by the company to extend its initial research.

Some believe that Mayo's strongly held views supporting employee recognition and job satisfaction shaded the results of the experiments. A company personnel manager, for example, recorded that employees in one of the test rooms had stressed the importance of achieving higher earnings. He drew this to Mayo's attention but the observation was discounted. In line with most of us, it seems, the professor was more comfortable with the idea that we work for love than that we do so for money.

The relationship between reward and recognition, however, is more complex than the bald results of employee surveys would suggest. Pay is emotional and as such can prove a powerful tool of business. We could be forgiven for believing that in investment banking it is an overused tool. There the levels of pay and bonuses have become so consuming for traders that managers no longer seem capable of restoring a sense of proportion to their reward systems.

Some of the blame for these distortions might be levelled at an over-reliance on pay comparisons. HR managers no longer seem capable of making a move without consulting industry comparisons that always define rates in their respective quartiles. Few employers or employees want to see themselves in the lower salary quartile. The result is an endless game of pay catch-up.

Why do managers take so much notice of these comparisons? Why is there an obsession with paying the rate for the job? Why will people not recognise that pay levels are an important aspect of recruitment and motivation? People prefer to work for love and money - not for either one or the other.

A few days ago I was discussing with a senior HR manager the relative rates of pay for new starters and trained employees in a large company. The terms of the conversation do not allow me to reveal its name. Trained employees were earning well above the rates paid to those in similar jobs among competitor companies. But starter pay was about the same or, in some cases, less than that offered elsewhere.

The nature of the work - in a traditionally low-paid sector - means there is a high turnover of staff during the training period in the first six to eight months. Those who stay are soon earning hourly rates in the region of 20 per cent higher than competitors' rates. Moreover the training input, promotion prospects and long-term career prospects are excellent. This company did not grow out of chance or serendipity. Yet its entry-level pay did not match its determination to be better than the competition.

The company did not explain its rationale but I suspect it has something to do with a desire to reward those who stay. Its reasoning probably goes something like this: if you accept that you are going to lose a certain proportion of new starters, why waste good money on unknown quantities who may lack the commitment to stay? A pay specialist, who joined the conversation, suggested that low entry-level rates could discourage some people from the very beginning. They did not reflect the company's strength elsewhere in the marketplace.

The HR director defended the rates. In a survey of employee concerns, pay was down at number nine on the list, he said.

His findings, with those of the Reed survey, are consistent with those of Frederick Herzberg among a group of secretaries at the Bell Telephone Company in the 1950s.

The closely supervised secretaries were demoralised about their work and a pay rise did nothing to improve the quality of their work. Only when supervision was relaxed and their responsibilities were broadened did their productivity increase. Yet Herzberg himself recognised that pay could not be divorced from the factors that influence performance. The difference is that we react negatively to pay - it is never enough - but positively to a pat on the back.

So pay and recognition each colour a different set of responses. But we should be assured: both matter.

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